Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301311 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11185
Publisher: 
CESifo GmbH, Munich
Abstract: 
Using high-frequency administrative data covering millions of US homeowners, I document three novel facts about homeowner responses to property tax increases driven by rising home values. First, non-migrating homeowners cut consumption, exhibit financial distress, and do not borrow against their higher home values. These responses run contrary to the predictions of frictionless models, in which homeowners should borrow to avoid costly adjustments. Second, heterogeneity analysis shows that consumption responses do not vary by liquidity, consistent with savings target behavior. In contrast, distress responses are concentrated among liquidity-constrained homeowners. Many homeowners report being debt averse and therefore unwilling to borrow in order to avoid illiquidity and distress. Third, tax hikes induce migration—partly by displacing illiquid homeowners—but do not accelerate neighborhood change. A simple welfare framework reveals that the largest costs of property taxes arise from financial distress among liquidity-constrained homeowners.
Subjects: 
property taxes
housing
household finance
JEL: 
H20
G51
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.